University of California Institute on Global Conflict and Cooperation

Many countries, including the United States and China, have come to see economic statecraft as superior to armed conflict. Faced with a trading partner’s economic sanctions, some countries try to avoid risk by complying with or ignoring the coercer’s demands, but others retaliate and escalate conflict. In recent years, sanctions have been applied, not only to “rogue” states, but against trading partners. The United States and China, but also Japan, Australia, and Canada, were either the target or purveyor of economic coercion by or against trading partners in the last five years. However, not all resulted in trade wars. When, then, do economic sanctions lead to trade wars? This policy brief examines the ongoing Japan-South Korea trade dispute with a focus on how policymakers’ risk perceptions regarding global value chains (GVCs) can influence when trade wars take shape.